Proposal would halve business tax rate

Gov. Tim Pawlenty's budget includes tax cuts and credits that he says will create jobs and help businesses. The governor proposed reducing the business tax rate from 9.8 percent to 4.8 percent over six years. He also wants to provide an up-front exemption of the sales tax for purchases of capital equipment and a tax credit for small businesses purchasing machinery and equipment.

Reducing the corporate franchise tax alone would reduce revenues $120 million in 2010 and 2011 and $410 million in 2012-13.

Pawlenty also proposed expanding his controversial JOBZ tax-free zone program to a new Green JOBZ, a 12-year tax-free zone program provided to companies that create renewable energy or lessen energy consumption or emissions.

These tax proposals are likely to face some of the stiffest opposition as Republican Pawlenty's budget moves through the DFL-controlled Legislature. House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, outlined some of the concerns, particularly the idea of reducing the corporate franchise rate when 46 percent of the companies that would be affected are not headquartered in the state.

"You are essentially giving those 46 percent of companies a tax break with no accountability and oversight that they are actually going to invest that money in Minnesota," she said. "They are going to invest that money in California, in Massachusetts, in New York. That's a real concern."

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Updated Jun. 23, 2014